LONDON (Reuters) - GlaxoSmithKline (>> GlaxoSmithKline plc), battered by weak U.S. drug sales and a bribery scandal in China, is looking to float its fast-growing HIV drugs business as part of a recovery plan that includes a fresh round of cost cutting.

As a standalone company ViiV Healthcare would be among the top 40 companies in London's FTSE 100 index, outranking such household names as retailer Marks and Spencer (>> Marks and Spencer Group Plc), GSK Chief Executive Andrew Witty told reporters.

Analysts at Jefferies said they valued the HIV and AIDS division at about 17 billion pounds ($27 billion).

Announcing third-quarter results, Britain's biggest drugmaker said the new restructuring programme would save 1 billion pounds in annual costs within three years, with half of that achieved by 2016.

GSK also put a floor under its dividend by pegging the 2015 payout to the same level as this year's 80 pence a share.

"Glaxo has announced that it is giving itself a shot in the arm, with a more streamlined approach to its business model," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

Shares in the company closed 2.6 percent higher, clawing back some of this year's decline.

While the European healthcare sector <.SXDP> has risen 14 percent this year on optimism over new drugs and a spate of deal-making, GSK stock has lost a similar amount on falling sales and earnings forecasts, despite April's far-reaching asset swap deal with Switzerland's Novartis (>> Novartis AG).

A central concern for investors has been GSK's ability to pay its dividend in the face of slowing growth. The company finally broke a run of steadily rising payouts by announcing an unchanged third-quarter dividend, but softened the blow by saying it would return an additional 4 billion pounds to shareholders next year through a special share scheme.

A run of weak quarters and a fine of nearly $500 million for bribery in China has heaped pressure on Witty. The most pressing concern, however, is the sharp fall in sales of GSK's 15-year-old respiratory medicine Advair, particularly in the United States, where price pressure is acute, and the slow uptake of new respiratory drugs Breo and Anoro.

Witty acknowledged that the company is going through a "painful" period but said the respiratory business was set to return to growth in 2016.

PIPELINE ISSUES

The weak showing in respiratory medicine, a field GSK has dominated for decades, comes on top of recent disappointments with high-risk experimental drugs in heart disease and cancer. However, the company said its pipeline is expected to produce a sustained flow of new drugs over the next 5-10 years.

In the face of these challenges, investors are keen for GSK to unlock value and Witty said the decision to explore an initial public offering (IPO) of a minority shareholding in ViiV Healthcare showed the company's financial flexibility.

"It signals a patient but enduring commitment to explore avenues to create shareholder value," Witty said.

GSK has a stake of nearly 80 percent in ViiV Healthcare, with Pfizer (>> Pfizer Inc.) and Shionogi (>> Shionogi & Co Ltd) holding the rest.

Witty did not give a timetable for a ViiV Healthcare IPO and said there was no rush to sell, since the business would continue to grow strongly for the foreseeable future. Its newest HIV medicine is Tivicay, which has been a big success.

Some analysts have suggested GSK could go further in breaking itself up, with speculation of potential spin-offs for consumer health and vaccines. The vaccines unit has an experimental Ebola vaccine that GSK is racing to develop.

Witty said he would remain "extremely pragmatic", noting the company had already announced plans to divest certain older off-patent drugs.

OUTLOOK UNCHANGED

GSK stuck to its financial outlook for the full year, predicting core earnings per share (EPS) "broadly similar to 2013" in constant exchange rate terms. That outlook was already pared back in July from a previous forecast of an increase of 4-8 percent.

Third-quarter sales were 5.65 billion pounds, down 10 percent from a year earlier. Core EPS - the measure most followed by investors - were flat at 27.9 pence.

Analysts had forecast sales of 5.75 billion pounds and core EPS, which excludes certain items, of 23.9 pence, according to Thomson Reuters data.

The earnings beat was helped by lower sales, administrative and research costs, as well as a reduced tax rate.

(1 US dollar = 0.6231 British pound)

(Additional reporting by Atul Prakash; Editing by David Goodman)

By Ben Hirschler